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“The global port congestion index has reached the 2 million TEU mark, accounting for 6.8% of the global fleet, with Singapore becoming the new congestion hotspot,” Linerlytica commented in its latest weekly report. “The SCFI (Shanghai Containerized Freight Index) has risen by 42% over the past month and is set to increase further in June due to added surcharges and rate hikes by shipping companies.” 

Linerlytica noted that shipping companies are forced to purchase new equipment and extend the lease of ships until after September, “because they were initially hesitant to commit in advance, in case demand drops after the summer peak season.” 

However, the current market signals are “very bullish,” reminiscent of the significant rate hikes that began in 2021 and continued into 2022. 

At that time, port congestion was caused by cargo backlogs at U.S. ports and the insufficient capacity of U.S. inland ports to store or transport containers, leading to ship delays waiting for cargo loading slots. This chain reaction resulted in a shortage of empty containers returning to Asia for reloading. 

This year, the container supply chain is congested again, with Singapore as the latest victim. The detour around the Cape of Good Hope has extended the journey, causing delays in ships returning to Asia. Additionally, shipping companies do not have enough tonnage to handle the longer supply chain caused by the detour around the Cape of Good Hope. 

“In recent days, berth delays have been as long as seven days, with the total capacity waiting for berths rising to 450,000 TEU. Severe congestion has forced some shipping companies to cancel their scheduled stops at the port of Singapore, which will exacerbate problems at downstream ports that will have to handle the extra throughput.” 

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Furthermore, the delays have led to ship clustering, causing “spillover congestion” and disruptions in the schedules of downstream ports. 

Just last week, the increasing severity of port congestion had already caused over 400,000 TEU of shipping capacity to exit circulation, and with the peak season approaching, further escalations to the current severe delays are expected in the coming weeks. 

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